Certified Internal Auditor (CIA) Practice Test

What kind of audit should be performed to evaluate the audit of corporate bonuses?

1. Should always be part of the standard financial audit.

2. Should be performed independently of other control audits.

3. Should include management reviews of the compensation system.

4. Should be done annually with direct involvement from HR.

The correct answer is: Should be performed independently of other control audits.

Performing the audit of corporate bonuses independently of other control audits is crucial for several reasons. When audits are conducted separately, they provide a focused assessment of the specific processes and controls related to bonus compensation. This separation allows for a deeper dive into potential conflicts of interest, compliance with policies, and the alignment between bonus structures and performance outcomes without being influenced by the broader context of other audits. Independent audits enhance objectivity and help ensure that the evaluation of corporate bonuses is thorough and unbiased. They can highlight unique risks associated with compensation structures that might be overlooked when included as part of a broader audit, which may dilute the focus on this specific area. In contrast, the other choices all suggest approaches that might integrate the evaluation of bonuses into larger frameworks, which could limit the detailed scrutiny necessary to properly assess the effectiveness and fairness of the bonus audit process. Thus, the independent approach is more effective in providing reliable insights into the bonus structure and its implications.